Research Topics

Publications on Internal devaluation

There are 4 publications for Internal devaluation.
  • A Labor Market–Augmented Empirical Stock-Flow Consistent Model Applied to the Greek Economy


    Working Paper No. 949 | February 2020
    This paper extends the empirical stock-flow consistent (SFC) literature through the introduction of distributional features and labor market institutions in a Godley-type empirical SFC model. In particular, labor market institutions, such as the minimum wage and the collective bargaining coverage rate, are considered as determinants of the wage share and, in turn, of the distribution of national income. Thereby, the model is able to examine both the medium-term stability conditions of the economy via the evolution of the sectoral financial balances and the implications of functional income distribution on the growth prospects of the economy at hand. The model is then applied to the Greek economy. The empirical results indicate that the Greek economy has a significant structural competitiveness deficit, while the institutional regime is likely debt-led. The policies implemented in the context of the economic adjustment programs were highly inappropriate, triggering private sector insolvency. A minimum wage increase is projected to have a positive impact on output growth and employment. However, policies that would enhance the productive sector’s structural competitiveness are required in order to ensure the growth prospects of the Greek economy.

  • Baltic Austerity—the New False Hope


    One-Pager No. 32 | June 2012
    Ireland was at one time the poster child for fiscal austerity, but that country’s disappointing economic performance of late has left austerity apologists searching for a new model—and the Baltic economies appear to be next in line. But Estonia, Latvia, and Lithuania are as unsuited to stand as successful models of expansionary fiscal contraction and “internal devaluation” as their Irish predecessor.
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    Author(s):
    Rainer Kattel Ringa Raudla

  • Austerity that Never Was?


    Policy Note 2012/5 | June 2012
    The Baltic States and the Crisis

    The commonly cited example of the successful application of “internal” devaluation as a strategy for economic recovery is that of the Baltic economies. In this Policy Note, we discuss whether the Baltic austerity plan worked, how it was designed to work—and, most important, whether it can be replicated anywhere else. We argue that the Baltic recovery has unique features that do not relate to domestic austerity policies, nor are they replicable elsewhere.

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    Author(s):
    Rainer Kattel Ringa Raudla

  • The New European Economic Dogma


    One-Pager No. 26 | February 2012
    Improving Competitiveness by Reducing Living Standards and Increasing Poverty
    Greece’s new EU/IMF bailout package is all about private sector wage cuts and an overhaul of labor rights. In short, it will do absolutely nothing to address the nation’s economic crisis because it is not designed to rescue Greece’s embattled economy. In fact, it will have the unwanted effect of keeping the nation locked in a vicious cycle of debt—and leading, finally, to its exit from the eurozone.  
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    Associated Program:
    Author(s):
    C. J. Polychroniou

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